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The impact of taxes and social spending on inequality and poverty in Argentina, Bolivia, Brazil, Mexico, Peru, and Uruguay

Nora Lustig (), Florencia Amábile (), Marisa Bucheli (), George Gray Molina, Sean Higgins, Miguel Jaramillo, Wilson Jiménez Pozo, Veronica Paz Arauco, Claudiney Pereira, Carola Pessino, Maximo Rossi (), John Scott and Ernesto Yáñez Aguilar

No 13, Commitment to Equity (CEQ) Working Paper Series from Tulane University, Department of Economics

Abstract: How much redistribution and poverty reduction is being accomplished in Latin America through social spending, subsidies, and taxes? Standard fiscal incidence analyses applied to Argentina, Bolivia, Brazil, Mexico, Peru, and Uruguay using a comparable methodology yields the following results. Direct taxes and cash transfers reduce inequality and poverty by nontrivial amounts in Argentina, Brazil, and Uruguay but less so in Bolivia, Mexico, and Peru. While direct taxes are progressive, the redistributive impact is small because direct taxes as a share of GDP are generally low. Cash transfers are quite progressive in absolute terms, except in Bolivia where programs are not targeted to the poor. In Bolivia and Brazil, indirect taxes more than offset the poverty-reducing impact of cash transfers. When one includes the in-kind transfers in education and health, valued at government costs, they reduce inequality in all countries by considerably more than cash transfers, reflecting their relative size.

Keywords: fiscal incidence; inequality; poverty; taxes; social spending; Latin America (search for similar items in EconPapers)
JEL-codes: H22 I3 O1 (search for similar items in EconPapers)
Date: 2013-04, Revised 2013-08
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Published in Commitment to Equity, April 2013, pages 1-31

Downloads: (external link) Revised version, 2013 (application/pdf)

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